Dan
CONFIDENTIAL
I was pleased to talk to you yesterday and especially pleased to know that the Government is taking the plight of the families building and buying homes, tenants and the building industry very seriously.
The Home Builders Action Group [HBAG] tries to take a relatively sophisticated view of the financial and political realities of the world its members work in.
That means we know and accept that:
- Politically, the most attractive option for Government is to assist home buyers, tenants and would be home buyers and tenants. No matter how badly it is needed and how much it is justified, helping builders requires much more explanation and is harder to ‘sell’;
- Resources are limited and Government (like everyone else) has to get the biggest “bang for its buck”. That means limiting the assistance to the home buyers served by the building industry and then to the specific sector in that industry that needs the help;
- Shaping the assistance so that it can be presented in the way most welcomed by the community and those who need it; and
- Including assistance that can be provided and no or low cost.
Fortunately, the different problems of home buyers, renters, landlords and the industry lend themselves to a single solution and assistance to the building industry – properly presented – will be relieve the different the problems of the various groups.
HBAG suggests
Assistance that can be provided at no or low cost.
- Amendments to the Home Building Contracts Act [1991] (the Act) fall into this category and will be welcomed by the industry. As HBAG has previously pointed out, the view that the Act assists home builders by stipulating Fixed Price Contracts with strict limitations on price increases is incorrect. In fact, that aspect of the Act is the source of many of the problems home buyers and builders are facing. There is absolutely no control over price increases passed on to builders by suppliers and trades so that when prices rose by more than 50% in two years, builders could not pass them on. As a result, many builders closed their doors leaving clients with unfinished and much more expensive homes and suppliers and trades in desperate positions chasing payment. Home buyers clogged the rental market where scarce rentals saw big increases in rents. Builders who remained in business concentrated on profitable contracts causing further delays to loss making jobs.
HBAG is not suggesting “open slather” but rather amendments to the Act that allow, among other changes, fair and justified price rises - Amended insurance indemnity provisions that relieve all sectors of the industry of major concerns.
Assistance that can be provided at low cost.
- The perfect storm that resulted from the restrictions of the Act, the government stimulus that added to an already overheated demand, the shift of labour from the building industry to resources companies and tightening monetary policy, had the added adverse impact of causing financial institutions to stop lending. This simply compounded and amplified the problem. The SME Loans Scheme can be amended to suit present post COVID-19 circumstances to provide sorely needed support for cashflow problems that were caused by factors outside the control of the industry or its clients. Assistance can be limited to qualifying companies and geared to performance in completing contracts.
Assistance to builders, home builders and tenants
- This can be achieved by considering ‘Legacy’ Contracts which are really the cause of much of the distress. These are contracts forced by the Act into making losses. They are now working through the system and will not be the same problem in the future as the home building industry passes out of the aberrant last two years.
HBAG believes it is within the competence of Government to devise a scheme of assistance that is based on these Legacy Contracts and is qualified by rules that see grants to owners that are paid to builders complete homes as quickly as possible without price rises. It would also be appropriate to recognise, in modified form, the impact on building companies of past Legacy contracts
In terms of community need and problems to be addressed, the funding of the measures described above would certainly be welcomed in the community as addressing problems that are among the top two or three causing most concern.
The Home Builders Action Group [HBAG] will certainly play its part in making sure its constituency (including a very comprehensive email list) and the public were fully informed about the Government’s assistance.
Best Wishes
Yours sincerely
Jason Janssen
0412 373 404
CHAIRMAN
Home Builders Action Group